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Mi Mercado Es Su Mercado: The Flawed Competition Analysis of Mexico’s COFECE

 |  March 20, 2024

By: Mario Zuñiga & Geoffrey Manne (Truth On The Market)

Mexico’s Federal Economic Competition Commission (COFECE) has released its preliminary report after investigating competition in the retail electronic-commerce market, focusing on platforms like Amazon. The report indicates that:

Preliminary findings suggest the absence of effective competition in the Relevant Market of Sellers and Buyers, along with the presence of three Barriers to Competition hampering the efficient functioning of these markets.

The identified barriers include:

“Artificiality” in certain aspects of marketplace loyalty programs, influencing buyer behavior alongside “network effects,” despite not being directly tied to transaction facilitation. “Buy Box opacity,” where sellers lack insight into Amazon and Mercado Libre’s selection processes for products featured in the Buy Box. “Logistic solutions foreclosure,” as Amazon and Mercado Libre restrict API access to select logistics providers, favoring their own fulfillment services. To address these barriers, the report proposes remedies targeting Amazon and Mercado Libre:

Disassociating streaming services and other unrelated offerings from membership and loyalty programs like Amazon Prime. Ensuring sellers have access to necessary information and processes for Buy Box selection. Granting third-party logistics companies API integration and impartial Buy Box selection criteria. However, we identify three critical flaws in the report:

  1. Narrow Definition of Relevant Market: The investigation follows a quasi-regulatory procedure rather than an abuse of dominance approach. COFECE must establish an absence of effective competition under Article 94 of the Mexican Federal Economic Competition Act. While defining relevant markets narrowly is common, COFECE’s approach appears overly restrictive, resembling the flawed practices of the American FTC.
  2. Lack of Clarity on Dominant Position: COFECE’s definition of “dominant position” necessitates establishing a relevant market where challenged conduct or business models have an impact. However, the report’s definition of relevant markets seems excessively narrow, mirroring the FTC’s problematic practices.
  3. Following FTC’s Example: COFECE’s approach echoes the FTC’s approach, which has been criticized for its narrow market definitions and failure to effectively address anticompetitive practices.